MYM Nutraceuticals (MYM.C) has announced it expects to receive a cultivation license for its Laval facility in the near future, prompting a huge surge in volume and a spike in share price as high as 175%.
Although shareholders rejoiced on the web forums, one organization certain to celebrate this announcement is Trichome Financial (TFC.V), the company currently keeping MYM afloat.
In August of this year, Trichome demonstrated its generosity by offering MYM $5.5 million in debt financing which will allow the latter “to fully fund its strategic plan through 2020.”
For any who doubt the survival of a fraternal spirit in the modern world, look no further than this announcement.
But despite the stellar price action MYM is seeing today, the company has unfortunately seen a number of its acquisitions, proposed and realised, go awry, necessitating the loan from Trichome.
“We are a Sophisticated Organization with Deep Talent and Capital”
MYM Nutraceuticals has had a spate of bad luck in recent years: The company’s partnerships and investments have not seemed to pan out or even match the relative benchmark for success within the cannabis sector.
The cancelled BioHemp acquisition is the most recent example, but the company has a history of having eyes larger than its stomach.
The company has invested heavily into the wellness product market, particularly in respect to brands, though it has shown interest in establishing a standard cultivation arm through its 2017 acquisition of 75% of CannaCanada.
Through the acquisition of CannaCanada, the Company entered into an exclusive deal with the Municipality of Weedon, Quebec, Canada to build a 1.5 million-square-foot cannabis facility consisting of
fifteen 100,000-square-foot greenhouses.
A May 2018 news release announced CannaCanada had “broken ground on the 1.5 million square foot cannabis production facility located in Weedon, Quebec,” and that the company has obtained the “the approved permits, architectural drawings, and security plans.”
But more recently, MYM said CannaCanada has plans to build an 8,000 square foot greenhouse and a 6,000 square foot processing facility to complete their submittable video package for Health Canada’s approval.
The primary asset of CannaCanada is “the value of the License Application with the Municipality of Weedon and Health Canada,” rather than property, according to the company’s audited financial statements from 2019.
Another line reads, “As at May 31, 2019, CannaCanada was exploring options to finance the continuation of the build,” raising questions about the project’s target completion date for end-of-year 2019 and the company’s profitability.
Take the company’s cash position, for instance: As of May 31, 2019, the company had only $2.3 million in cash and cash equivalents, and nearly one third of the company’s asset line was from deposits and prepaid expenses.
Deposits like the funding of CROP Infrastructure’s (CROP.C) Nevada CBD-hemp operations which were recently razed by antelope and invasive weeds.
Subsequent to the year end, the Company has determined that a significant amount of the crop in Nevada has failed. CROP has provided MYM with an amendment to the Production Agreement guaranteeing, through a promissory note, that the principal investment will be repaid.
CROP currently has $26,623 in cash on its balance sheet and closed today at $0.03. With no assets to speak of, and with a downward trending stock, it is unclear how MYM will recoup their investment.
There have been other investments which haven’t delivered for MYM also: In 2017, the company acquired Joshua Tree in 2017, a brand with a product line exceeding 20 hemp products, and Mary Jane’s Touch (MJT), a CBD supplier which worked with Joshua Tree.
In early 2018, MYM entered into a binding letter of intent with Budly, a software developer whose app is used for “connecting medicinal cannabis patients with local dispensary drivers.”
Dear reader, it will likely not surprise you at all to know these investments have not done anything to help this company.
“As at May 31, 2019, the Company has not been able to secure a license to continue producing the HempMed or Joshua Tree products,” says MYM according to their latest financials which has written the company’s goodwill down to nil.
The purchase price was $920,000, while the write-down totaled $888,056. The same is true for Budly and MJT.
MYM Nutraceuticals is not doing particularly well, but that goes without saying. The company recorded no revenue for the year, and yet spent $6 million on general and administration and $4.6 million in stock-based compensation.
So now the company has taken a loan from Trichome at a 12% interest rate to keep the mill running, but the key here is the following passage:
In connection with the Trichome Financing, the Company has provided Trichome with security against all of its assets and licenses.
Property, plant and equipment is totaled at $11.75 million and is the single largest factor adding to the company’s asset line. It’s all the company has to bargain with, and lenders such as Trichome know it.
If MYM succeeds, Trichome earned 12%. If MYM fails, Trichome gets the PPE.
What a time to be a lender.